Vivendi Plans Talks Today About Special Dividend From Activision Blizzard
Newspapers and websites are abuzz with news of Vivendi and its plans to extract an insane amount of money from Activision Blizzard. The sum will turn out to be more than A/B actually has and will throw the gaming company into debt. We at GAMEBREAKER seek to better understand the implications of the potential money drain by first looking at the facts and then inviting readers to chime in with your thoughts.
Vivendi SA, a French media conglomerate, may ask for $3 Billion from Activision Blizzard. In today’s Vivendi board meeting a move to extract the money will be discussed. The Wall Street Journal reported that about $2 Billion of that sum would be used to help with high debt that Vivendi has accrued.
After today’s meeting, it is assumed that the Vivendi board members will press for approval at a regular Activision Blizzard meeting on Thursday. Reuters reports that six of the eleven A/B board members are from Vivendi. Sources at WSJ say that because most of A/B’s money is located in offshore accounts, the company will go into debt if asked to hand over the large sum.
Activision Blizzard is a very successful company, and has just over $4 Billion in its accounts, much of it kept in off-shore. The gaming company has done well for itself by focusing on big titles and not spreading itself out to mobile and free-to-play games. They would need to go into debt in order to meet the special dividend that will be put forth by Vivendi because of US taxes that will come into play when the money changes hands. Current estimates as to the amount of debt that A/B will be forced to take on sits at about $1.5 Billion.
Vivendi has accrued over $17 Billion in debt, which was the result of poor business strategies involving telecoms. The original agreement with Activision Blizzard stated that the parent company could not require special dividends from A/B, but that deal expired earlier this month. Vivendi is wasting no time taking everything it can from the game company.
Although Activision CEO Bobby Kotick seems interested in buying the company back from Vivendi, that hasn’t happened yet. Vivendi has already tried selling off the company, but it didn’t seem there was an interested party who had the cash on hand to buy the world’s largest game publisher. At this point, is no reason why the special dividend put forth by the parent company won’t go through.
What Does It All Mean?
Even with the incoming dramatic drain of cash, Activision Blizzard is still sitting in a very good position. The company boasts some of the industry’s biggest and most successful titles and the future looks great as the new PlayStation 4 and Xbox One loom on the horizon.
Until now Vivendi has maintained a hands-off approach when it comes to A/B, but the cash drain could be the first sign of a major change in that policy. Once Activision Blizzard is thrown into substantial debt by Vivendi, it is unclear what we as consumers can expect. Could smaller, cheaper titles be on the way to help balance the budget? Perhaps Blizzard will offer more hats? It’s possible that layoffs could ensue that might affect customer service or even the level of development that we have come to expect in their games.
Whatever your thoughts on Activision Blizzard, this much is true: The wildly successful company has made very good business decisions and is about to go into debt because its parent company made poor business decisions…unless you count the one where they bought Activision Blizzard in the first place.
So what do you think? Will we see the effects of this substantial money extraction?